About Canadian Mutual Funds
- While North American mutual funds first started in the U.S. with the creation of the Massachusetts Investors Trust in the 1920s, the creation of the Canadian mutual fund market followed shortly thereafter. The first strictly-Canadian mutual fund was created in 1932 with a total value of $51 million ($402 million in 2007 dollars). Originally called the Canadian Investment Fund, Canada's first mutual fund still exists today under the same moniker. Unfortunately, the beginnings of Canada's mutual fund market coincided with the founding of the nation's mutual fund industry, effectively slowing its growth. In the U.S., Congress passed legislature to bolster the stability of the stock market. Canada's parliament did likewise. In the 1960s, Canada's stock market finally began to grow in rapid succession. The total value of the Canadian mutual fund industry doubled between 1960 and 1963, then continued to grow through the 1990s as an influx of investors entered the market from the U.S. During this time, with mutual fund investments at their peak, the Bank of Canada's interest rates were the highest they have ever been. By 2001, the total value of the Canadian mutual fund market was $426 billion, a significant increase over its value when it started just 80 years prior.
- There are three major types of Canadian mutual funds. The first type is the open-end fund, which was the variety of mutual fund first used in Canada. This type of mutual fund buys and issues shares at the end of each day and does not restrict investors from leaving or entering the investment pool. The second type of Canadian mutual fund is the exchange-traded fund, which is the newest type of mutual fund. These mutual funds are traded like open-end funds but are sold and bought in larger shares and are typically cheaper. The third type of mutual fund is the equity fund. In Canada, equity mutual funds are usually made up of stocks and are strategically structured to accomplish specific goals for investors.
- Over 50 million Canadian individuals invest in Canada's mutual fund market. The size of the Canadian mutual fund market, both in monetary value and number of mutual funds available, has grown considerably since the first Canadian mutual fund went public in the 1930s. In the 1990s, the monetary size of Canadian mutual funds increased by almost 2,000 per cent to its current value of more than $430 billion. In the 70 years since mutual funds first became available in Canada, the number of mutual funds available to individual investors increased from one to over 1,500. The largest mutual fund conglomeration is owned by IGM Financial Inc.
- Canadian investors should be aware of expenses attached to investing in Canada's mutual fund market. One of the foremost fees encountered by individual investors are management fees charged by the investment firms and corporations that manage, trade and buy shares in mutual funds. These management fees basically charge an investor for access to the mutual fund managed by the company. In return, the company employs stock experts and advisers to monitor the state of the market and make trading decisions. Often times, these fees are connected to the value of the mutual fund. A secondary set of expenses are non-management expenses charged by some Canadian mutual funds. These may include registration fees, the cost of purchasing and selling mutual fund shares, and the cost of mailing material to investors. Before investing in a mutual fund, investors should request a detailed list of all expenses involved in dealing in the specific fund.
- Mutual funds are attractive to Canadian investors because they offer more stability than individual stocks. In general, the wide range and scope of a fund allows a slower, steadier growth than the rapid rise and fall of individual stocks. Also, mutual funds may be cheaper to invest in than individual stocks because the fund allows a large group of investors to pool their resources and purchase large amounts of stocks at a lower cost. Also, many investors like having a group of experts manage the buying and selling of stocks in a fund rather than having to manage it themselves. Historically, mutual funds often outperform stocks in the long term, though their growth is usually slower.